Goldman Buy Call Spurs E-House Rally: China Overnight

Dec. 13 (Bloomberg) -- E-House China Holdings Ltd. led
gains in Chinese stocks traded in New York after Goldman Sachs
Group Inc. said the online real estate services provider is
poised to extend its six-month rally as housing prices soar.

The Bloomberg China-US Index of the most traded Chinese
equities in the U.S. rose less than 0.1 percent to 104.55
yesterday, after dropping the most in two years the previous
day. About two stocks rose for every one that fell on the gauge.
Shanghai-based E-House jumped 6.8 percent while hotel chain
China Lodging Group Ltd. posted the biggest advance in a month.
Baidu Inc., China’s biggest search engine, capped the largest
two-day decline since October.

The value of homes sold in China increased 19 percent to
the highest since December 2011, according to government data
released this week. E-House, which has surged 50 percent this
quarter to lead gains on the China-US gauge, stands to benefit
from this trend as a property agent, Shanghai-based Goldman
analysts led by Yi Wang wrote in a report dated Dec. 11. Goldman
also raised its estimate for E-House’s 2014 adjusted earnings by
10 percent.

“Rising home sales signal that the government won’t take
irrational steps to curb growth of China’s property sector,”
Tian X. Hou, the founder of T.H. Capital LLC, said by phone from
Beijing yesterday. “Investors didn’t consider E-House as an
Internet company until this year, after it expanded its e-commerce business. Both government policy and its own business
restructuring have helped the stock’s performance.”

ETF Retreats

The iShares China Large-Cap ETF, the largest Chinese
exchange-traded fund in the U.S., slipped 1.1 percent to $38.11
in New York, extending its decline to a fourth day. The Standard
& Poor’s 500 Index retreated 0.4 percent as improving economic
data spurred speculation that the Federal Reserve will cut
stimulus as soon as next week.

E-House’s American depositary receipts soared to $13.80,
the highest level since February 2011. Trading volume was twice
the three-month average compiled by Bloomberg. The ADRs have
gained 237 percent in 2013.

The company sold $135 million of 2.75 percent five-year
convertible notes yesterday. The conversion price of the notes
was about $16.80 for each ADR, a 30 percent premium over the
closing level Dec. 11, the company said in a statement.

Goldman lifted its earnings projections for E-House by 11
percent for 2015 and 12 percent for 2016 to reflect “potential
benefits from the sharper focus on online expansion and our
estimated dilution impact from its convertible bonds issuance,”
according to the note. It also increased a 12-month price target
to $16.77 from $14.39.

SMIC Gains

China Lodging, a budget hotel operator based in Shanghai,
surged 6 percent to $25.76. Phoenix New Media Ltd., a television
and Internet news outlet, climbed 4.7 percent to $8.99, rising
the most in four weeks.

Semiconductor Manufacturing International Corp., a
Shanghai-based chip foundry, climbed 1.6 percent to $3.72 after
retreating 10 percent in a six-day slump. BOC International
Holdings Ltd. analysts led by Cheng Manjiang named the company a
2014 top pick among shares listed in Hong Kong in a report
yesterday.

Baidu’s ADRs slid 1 percent to $171.50 in New York,
retreating 4.7 percent from a two-year high of $108.77 reached
on Dec. 10. The ADRs have jumped 71 percent this year, the best
advance since 2010.

Mindray Medical International Ltd., a medical device maker
based in Shenzhen, tumbled 11 percent to $35.61, the biggest
decline since August 2010. Volume was four times the 90-day
average. Short interest on its stock was 23 percent of shares
outstanding as of Dec. 10, Markit data showed.

The Hang Seng China Enterprises Index in Hong Kong
retreated 1 percent to a four-week low of 10,962.18, while the
Shanghai Composite Index fell less than 0.1 percent to 2,202.80
in a third day of slump.